Bond Market – Post Election Trade Levels Out, Now Back to the Data

Early this week, Treasury yields seemed to “crest” as the 10 year hit just over 2.40% and then rallied to 2.31%. Note that the 10 year T was at its all time low of 1.32% in early July. With the stock market hitting all time highs, the long anticipated “great rotation” out of bonds into equities seems to be finally upon us. Markets are reacting to the anticipated return of actual fiscal policy after years of gridlock in Washington and the economy depending mostly on monetary policy from the Fed. But the big swings are all based on assumptions of policies that will not be in place until March 2017 at the earliest. The past few weeks have seen the markets react to a string of positive economic reports: Q3 GDP revised to 3.2%, consumer confidence much higher than expected, and today’s surprising OPEC agreement (which sent oil prices higher, always a harbinger of inflation). This Friday’s unemployment report will be closely watched. stay tuned.     David R Pascale, Jr.